Journal Article

Voluntarily Separable Repeated Prisoner's Dilemma

Takako Fujiwara-Greve and Masahiro Okuno-Fujiwara

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 76, issue 3, pages 993-1021
Published in print July 2009 | ISSN: 0034-6527
Published online July 2009 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2009.00539.x
Voluntarily Separable Repeated Prisoner's Dilemma

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Ordinary repeated games do not apply to real societies where one can cheat and escape from partners. We formulate a model of endogenous relationships that a player can unilaterally end and start with a randomly assigned new partner with no information flow. Focusing on two-person, two-action Prisoner's Dilemma, we show that the endogenous duration of partnerships generates a significantly different evolutionary stability structure from ordinary random matching games. Monomorphic equilibria require initial trust building, while a polymorphic equilibrium includes earlier cooperators than any strategy in monomorphic equilibria and is thus more efficient. This is due to the non-linearity of average payoffs.

Keywords: C73

Journal Article.  10986 words.  Illustrated.

Subjects: Game Theory and Bargaining Theory

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